One example does not prove a point definitively, but it does provide evidence to disprove some long held property myths. Given the learned views on SS, this might not be news, but i thought worthwhile to share.
This 2 br flat sold yesterday in North Balwyn sold at auction yesterday for $347,500 with 3 genuine bidders. I was one of the non genuines! Would rent in its current condition at around $340pw. Outgoings (owners cop, council & water rates) are approx $2200per annum. This property was owned by investors who had it rented out since 1998.
In September 2008 I purchased & settled flat 10 in the same block for $340,000. It's condition in relation to the one that sold yesterday was that it was slightly better, but not by much. In June 2010 my flat was sold and settled for $450,000. I added window furnishings and a split system at a cost of $3500. My rent for the property started at $305pw and the last rent was $320pw. Why did I sell? The prospective prices being paid were too high relative to rents and rents were not increasing at anything other than a normal rate.
I was lucky in that my purchase coincided with post GFC pessimism and price rise was in part due to government stimulus often discussed on SS.
Myth 1: time in the market not timing the market...
So in two years, these owners have 'lost' an opportunity to be $100,000 ahead. And its not as if they were living there and didn't suit their life plans and sell. The nature of the property market is such that you can make judgements from timing. The are some assets which are definitively long term holds, but others are much shorter term in nature. It's important amongst all the other things to understand where your property fits into this picture.
Myth 2: Inner city property doesn't get affected as much as fringe suburbs properties...
We could debate whether North Balwyn does fit into inner city given its 11kms out of the CBD, probably the next ring out to inner city. But it is very well desired especially because of amongst other things, its in the Balwyn High School Zone. Well, this is one example where prices have dropped 22% of its peak (assuming $450k was the peak for this property). No this isn't Point Cook, Tarneit or Pakenham!!.
Myth 3: Below median priced properties are more resilient to price downturns. This is only a mathematical argument. If you are investing, a 22% loss is material whether you have invested $900k or $450k. A property at a lower price has no less a reason to fall than its higher priced alternatives.
I often hear some of these old chestnuts used and do cringe when i hear them, because there are no absolutes in property investing. Good luck and be careful out there...
This 2 br flat sold yesterday in North Balwyn sold at auction yesterday for $347,500 with 3 genuine bidders. I was one of the non genuines! Would rent in its current condition at around $340pw. Outgoings (owners cop, council & water rates) are approx $2200per annum. This property was owned by investors who had it rented out since 1998.
In September 2008 I purchased & settled flat 10 in the same block for $340,000. It's condition in relation to the one that sold yesterday was that it was slightly better, but not by much. In June 2010 my flat was sold and settled for $450,000. I added window furnishings and a split system at a cost of $3500. My rent for the property started at $305pw and the last rent was $320pw. Why did I sell? The prospective prices being paid were too high relative to rents and rents were not increasing at anything other than a normal rate.
I was lucky in that my purchase coincided with post GFC pessimism and price rise was in part due to government stimulus often discussed on SS.
Myth 1: time in the market not timing the market...
So in two years, these owners have 'lost' an opportunity to be $100,000 ahead. And its not as if they were living there and didn't suit their life plans and sell. The nature of the property market is such that you can make judgements from timing. The are some assets which are definitively long term holds, but others are much shorter term in nature. It's important amongst all the other things to understand where your property fits into this picture.
Myth 2: Inner city property doesn't get affected as much as fringe suburbs properties...
We could debate whether North Balwyn does fit into inner city given its 11kms out of the CBD, probably the next ring out to inner city. But it is very well desired especially because of amongst other things, its in the Balwyn High School Zone. Well, this is one example where prices have dropped 22% of its peak (assuming $450k was the peak for this property). No this isn't Point Cook, Tarneit or Pakenham!!.
Myth 3: Below median priced properties are more resilient to price downturns. This is only a mathematical argument. If you are investing, a 22% loss is material whether you have invested $900k or $450k. A property at a lower price has no less a reason to fall than its higher priced alternatives.
I often hear some of these old chestnuts used and do cringe when i hear them, because there are no absolutes in property investing. Good luck and be careful out there...
